Half-year Report to 31 December 2019

RNS Number : 1009E

JPMorgan Global Growth & Income PLC

25 February 2020

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN GLOBAL GROWTH & INCOME PLC ('the Company')

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST DECEMBER 2019

Legal Entity Identifier: 5493007C3I0O5PJKR078

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

 The Company made good progress in the six months ended 31st December 2019. In the period, the Company saw a 4.7% return on net assets per share, which compares with a return of 4.6% from its benchmark (the MSCI All Countries World Index in sterling terms). The total return to shareholders was higher at 5.9% during the period, reflecting the further widening of the share price premium to net asset value.

The Company's shares continued to trade close to, or at a small premium to NAV during the half year and we were able to reissue 4,455,000 shares from Treasury for a total consideration of £15,018,000. The shares have continued to trade at a premium to NAV in 2020, allowing us to continue reissuing shares; up to the time of writing, a further 1,485,000 shares have been reissued from Treasury in 2020 for a total consideration of £5,251,000.

As a result of the rise in net asset value and issuance of new shares, shareholders' funds rose over the period from £441.5 million to £468.7 million.

PERFORMANCE ATTRIBUTION

 SIX MONTHS ENDED 31ST DECEMBER 2019

	%	%
C  ontributions to total returns
Benchmark return		4.6
Asset allocation	-
Stock selection	0.5
Currency effect	-
Gearing/cash	-0.1
Investment Managers' contribution		0.4
Portfolio return		5.0
Management fee/other expenses	-0.3
Performance fee	-
Net asset value return - prior
to structural effects		4.7
Structural effects
Share buy-backs/issuance	-
Net asset value return - Debt at par value		4.7
Impact of Fair Value Valuation of Debt	-0.2
Net asset value return - Debt at fair value		4.5
Return to shareholders		5.9

Source: JPMAM and Morningstar.

All figures are on a total return basis.

 This performance attribution analyses how the Company achieved its performance relative to its benchmark index. The Investment Managers' report provides a detailed commentary on these figures and discusses activity, performance and the market outlook.

  As announced last year, as part of the Board's succession planning and in anticipation of the retirement of Jonathan Carey later this year, the Board has, with effect from 1st January 2020, appointed as a director Sarah Whitney, a Chartered Accountant who has more than 30 years' experience in the corporate finance, investment and real estate sectors. She holds a number of senior non-executive appointments. It is the Board's intention that Sarah will assume the role of Chairman of the Audit & Management Engagement Committee when Jonathan retires.

In the second half of 2019, global markets were supported by central banks, which cut interest rates to try to maintain economic growth. Turning to the outlook for 2020, you will see from their report that the Investment Managers are cautious in the near term and are watching carefully to see what effect the spread of the COVID-19 virus might have on global economic activity. The Board continues to have confidence in the ability of the Investment Managers to identify attractively priced high quality stocks with which to build the Company's portfolio.

Nigel Wightman

Chairman     25^th  February 2020

INVESTMENT MANAGERS' REPORT

 An interesting year

When we cast our minds back to this time last year, writing this report, it's notable how much has changed. The latter part of 2018 brought a market crash, geopolitical tension and rising economic headwinds. The past six months however, have brought rising markets, signs of a trade deal and an improvement in economic momentum since the summer.

It is a sign of the world we live in today that each year brings with it something different to focus on. Four years of President Trump have almost passed, and we face another US election in November. Yet politics has not been a useful guide to market performance, and we continue to believe that we will best serve you, as shareholders of your Company, by concentrating our time on finding great companies to invest in.

The Company's benchmark, the MSCI All Country World Index, was up 4.6% in Sterling terms. This all came from a rally in the fourth quarter, as markets began to believe in the improvement in economic data come 2020, as well as the agreement for Phase 1 of a trade deal between China and the US. Indeed this number would have been stronger, but for the rebound in the pound, which lessened returns in Sterling somewhat.

We expect a return to earnings growth in 2020 as we recover from the manufacturing slump seen in 2019. Central banks also continue to be accommodative, but we remain on the lookout for signs of significant risk or exuberance. One risk we will discuss is that posed by the Covid-19 virus.

Portfolio Review and spotlight on stocks

Our focus on high conviction stock picking proved fruitful during the last six months, particularly during the last few months. Large positions in Alphabet, Charter Communications, and Taiwan Semiconductor (TSMC) were the most significant contributors to this outperformance.

Google's parent company Alphabet has been a long-term holding for us, and its recent strong performance has been driven by a reacceleration in their core search business, share gains in their cloud computing business, and ultimately an improvement in profit growth. The optionality around their autonomous driving division, and the impressive barriers to entry in their advertising business, mean we continue to be comfortable with our positions in the stock.

Charter Communications has demonstrated exactly the growth that we expected, growing their residential broadband subscriber base, driving a revenue acceleration. Important cost initiatives, such as self-installation of equipment, have helped the cash flow generation, but we believe there continues to be some way to go in the story. We believe broadband is highly unlikely to ever be replaced in a meaningful way by mobile broadband, given the ever increasing number of applications that drive the demand we have for bandwidth.

TSMC is another large position in the portfolio, given their dominant market position. They manufacture the chips that go into the devices we use every day, and have the very best technology with which to do so. Any company at the 'leading edge' of technology development uses TSMC, and the demand for both handsets and other appliances means their growth can be sustained for a very long time. This was evident in the past six months, driving the outperformance, and we believe it will continue.

Our investments in Ventas, Netflix, and Alexion Pharmaceuticals detracted from recent performance.

Ventas runs senior housing facilities in the United States, and was hurt by pricing pressure caused by a glut of supply. Whilst we believe this is likely to be temporary, we see the potential for technology to allow people to stay in their homes for longer as they age, and have sold our position in the name as a result.

Netflix was impacted by concerns around the Disney+ launch, and underperformed as a result. The added uncertainty from more competition led us to revisit our thesis on the name, and we felt we had better ideas elsewhere. As a result we have exited the position.

Alexion Pharmaceuticals is the manufacturer of drugs for rare blood diseases. Concerns around the potential for competitor drugs to have better efficacy, as well as a broader sell-off of biotech as the US contemplates changes to reimbursement, led to the stock underperforming. Recent data suggests they continue to have the superior product, and we believe they are unlikely to be impacted by any reform of drug pricing in the US. We will continue to be patient with the name, and see significant upside.

We were hurt by our Energy holdings, as shale oil producers operating in the Permian basin in Texas were hit during the past six months. Despite the important efforts worldwide to reduce carbon emissions, the world will still have a reliance on oil for some time. Our investments are concentrated in names that have some of the lowest carbon emissions of any energy company globally, and whilst we anticipate volatility, we believe the likes of Diamondback Energy will become very good investments.

Outlook and positioning

We have kept gearing relatively flat since the end of the financial year. The gearing facility is an important aspect of the Company, and we are constantly evaluating the appropriate level based on the opportunities we see in the market. We consider a range of economic and fundamental indicators when we think about gearing, and see while we expect some data to look less bad in the coming months, we still see risks to margins at companies around the world. When we look at PMI's, our valuation spreads, and overall equity valuations, we think a cautious stance is justified here. Historic indicators of a recession, including the yield curve, suggest risks remain somewhat elevated, and we will continue to watch the data carefully. It is also worth acknowledging the risks posed by the COVID-19 virus to the global economy. We are watching developments carefully, in particular watching for signs that the inevitable slowdown in China is having longer-term repercussions on employment numbers. At this time, we see no reason to adjust the portfolio, but the tail risk cannot be ignored. It is likely that earnings estimates will need to be revised down, but at this stage it is difficult to pinpoint the magnitude.

We continue to focus our time on identifying great companies, which will become great investments, as we believe this is where our true expertise lie. Equities have rebounded ahead of the improving data, and we must look for idiosyncratic opportunities, rather than relying on continued market appreciation. Today we see opportunities in high quality industrial companies, such as Airbus and Norfolk Southern, and in semiconductor companies that will continue to drive innovation.

We strongly believe that our strategy of searching out the best stocks from around the globe, and selecting only the most compelling, is a winning strategy. We have been increasing our positions in the stocks we hold, further concentrating the portfolio to ensure that this trust reflects the very best thinking of our team. This award-winning global research team, combined with an experienced portfolio management team, are well positioned to continue to deliver significant long-term returns for you, our shareholders. We look forward to this continued partnership.

 Helge Skibeli

Rajesh Tanna

Tim Woodhouse

Investment Managers  25^th February 2020

INTERIM MANAGEMENT REPORT

 The Company is required to make the following disclosures in its half year report:

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investment and strategy; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational; going concern; and financial. Information on each of these areas is given in the Business Review within the Annual Report and Financial Statements for the year ended 30th June 2019.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operation existence for at least twelve months from the date of the approval of this half yearly financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the financial statements.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)  the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st December 2019, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

(ii)  the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Nigel Wightman

Chairman     25^th February 2020

STATEMENT OF COMPREHENSIVE INCOME

 for the six months ended 31ST DECEMBER 2019

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	 31st December 2019			 31st December 2018			 30th June 2019
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
 Gains/(losses) on investments   held at fair value through  profit or loss	-	18,679	18,679	-	(38,464)	(38,464)	-	26,453	26,453
Net foreign currency gains	-	234	234	-	1,054	1,054	-	2,404	2,404
Income from investments	3,693	-	3,693	3,194	-	3,194	8,989	-	8,989
Interest receivable and similar  income	118	-	118	46	-	46	109	-	109
Gross return/(loss)	3,811	18,913	22,724	3,240	(37,410)	(34,170)	9,098	28,857	37,955
Management fee	(479)	(479)	(958)	(437)	(437)	(874)	(863)	(863)	(1,726)
Performance fee writeback	-	38	38	-	1,246	1,246	-	1,040	1,040
Other administrative expenses	(292)	-	(292)	(261)	-	(261)	(572)	-	(572)
Net return/(loss) before  finance costs and taxation	3,040	18,472	21,512	2,542	(36,601)	(34,059)	7,663	29,034	36,697
Finance costs	(236)	(236)	(472)	(227)	(227)	(454)	(448)	(448)	(896)
Net return/(loss) before  taxation	2,804	18,236	21,040	2,315	(36,828)	(34,513)	7,215	28,586	35,801
Taxation	(414)	-	(414)	(218)	-	(218)	(863)	-	(863)
Net return/(loss) after taxation	2,390	18,236	20,626	2,097	(36,828)	(34,731)	6,352	28,586	34,938
Return/(loss) per share  (note 3)	1.77p	13.54p	15.31p	1.62p	(28.44)p	(26.82)p	4.87p	21.91p	26.78p

STATEMENT OF CHANGES IN EQUITY

 for the six months ended 31ST DECEMBER 2019

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	Reserves1	reserves1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
 Six months ended 31st December 2019 (Unaudited)
At 30th June 2019	7,746	58,956	27,401	347,414	-	441,517
Issue of shares from Treasury	-	6,977	-	8,041	-	15,018
Net return	-	-	-	18,236	2,390	20,626
Dividends paid in the period (note 4)	-	-	-	(6,120)	(2,390)	(8,510)
At 31st December 2019	7,746	65,933	27,401	367,571	-	468,651
Six months ended 31st December 2018 (Unaudited)
At 30th June 2018	7,746	53,976	27,401	318,084	3,583	410,790
Issue of shares from Treasury	-	2,203	-	3,197	-	5,400
Net (loss)/return	-	-	-	(36,828)	2,097	(34,731)
Dividends paid in the period (note 4)	-	-	-	-	(7,960)	(7,960)
At 31st December 2018	7,746	56,179	27,401	284,453	(2,280)	373,499
Year ended 30th June 2019 (Audited)
At 30th June 2018	7,746	53,976	27,401	318,084	3,583	410,790
Issue of shares from Treasury	-	4,980	-	6,938	-	11,918
Net return	-	-	-	28,586	6,352	34,938
Dividends paid in the year (note 4)	-	-	-	(6,194)	(9,935)	(16,129)
At 30th June 2019	7,746	58,956	27,401	347,414	-	441,517

¹ These reserves form the distributable reserves of the Company and may be used to fund distributions to investors.

STATEMENT OF FINANCIAL POSITION

 at 31ST DECEMBER 2019

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	 2019	 2018	 2019
	£'000	£'000	£'000
 Fixed assets
Investments held at fair value through profit or loss	461,534	396,444	458,287
Current assets
Derivative financial assets	1,415	2,950	1,770
Debtors	593	833	1,062
Cash and cash equivalents	37,110	5,683	12,499
	39,118	9,466	15,331
Current liabilities
Creditors: amounts falling due within one year	(515)	(537)	(571)
Derivative financial liabilities	(1,289)	(1,851)	(1,298)
Net current assets	37,314	7,078	13,462
Total assets less current liabilities	498,848	403,522	471,749
Creditors: amounts falling due after more than one year	(30,029)	(30,023)	(30,026)
Provisions for liabilities and charges
Performance fee payable	(168)	-	(206)
Net assets	468,651	373,499	441,517
Capital and reserves
Called up share capital	7,746	7,746	7,746
Share premium	65,933	56,179	58,956
Capital redemption reserve	27,401	27,401	27,401
Capital reserves	367,571	284,453	347,414
Revenue reserve	-	(2,280)	-
Total shareholders' funds	468,651	373,499	441,517
Net asset value per share (note 5)	341.4p	285.6p	332.4p

STATEMENT OF CASH FLOWS

 for the six months ended 31ST DECEMBER 2019

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	 31st December 2019	 31st December 2018	 30th June 2019
	£'000	£'000	£'000
 Net cash outflow from operations before dividend and
interest	(940)	(908)	(2,202)
Dividends received	3,613	3,147	7,954
Interest received	120	27	61
Overseas tax recovered	42	143	244
Interest paid	(444)	(444)	(892)
Net cash inflow from operating activities	2,391	1,965	5,165
Purchases of investments	(166,137)	(158,991)	(473,732)
Sales of investments	181,571	154,887	472,974
Settlement of forward currency contracts	352	2,371	4,393
Net cash inflow/(outflow) from investing activities	15,786	(1,733)	3,635
Dividends paid	(8,510)	(7,960)	(16,129)
Issue of shares from Treasury	14,944	5,400	11,819
Net cash inflow/(outflow) from financing activities	6,434	(2,560)	(4,310)
Increase/(decrease) in cash and cash equivalents	24,611	(2,328)	4,490
Cash and cash equivalents at start of period	12,499	8,008	8,008
Exchange movements	-	3	1
Cash and cash equivalents at end of period	37,110	5,683	12,499
Increase/(decrease) in cash and cash equivalents	24,611	(2,328)	4,490
Cash and cash equivalents consist of:
Cash and short term deposits	4,778	4,722	518
Cash held in JPMorgan Sterling Liquidity Fund	32,332	961	11,981
Total	37,110	5,683	12,499

 Reconciliation of net debt

	 As at		 Other	 As at
	 30th June 2019	 Cash flows	 non-cash charges	 31st December 2019
	 £'000	£'000	£'000	£'000
 Cash and cash equivalents
Cash	518	4,260	-	4,778
Cash equivalents	11,981	20,351	-	32,332
	12,499	24,611	-	37,110
Borrowings
Debt due after one year	(30,026)	-	(3)	(30,029)
	(30,026)	-	(3)	(30,029)
Total	(17,527)	24,611	(3)	7,081

NOTES TO THE FINANCIAL STATEMENTS

 for the six months ended 31st december 2019

1.  Financial statements

 The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 30th June 2019 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which are unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.  Accounting policies

 The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015, and updated in March 2018, has been applied in preparing this condensed set of financial statements for the six months ended 31st December 2019.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 30th June 2019.

3.   Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	 31st December 2019	 31st December 2018	 30th June 2019
	£'000	£'000	£'000
 Return/(loss) per share is based on the following:
Revenue return	2,390	2,097	6,352
Capital return/(loss)	18,236	(36,828)	28,586
Total return/(loss)	20,626	(34,731)	34,938
Weighted average number of shares in issue	134,639,111	129,483,894	130,500,107
Revenue return per share	1.77p	1.62p	4.87p
Capital return/(loss) per share	13.54p	(28.44)p	21.91p
Total return/(loss) per share	15.31p	(26.82)p	26.78p

4.  Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	 31st December 2019	 31st December 2018	 30th June 2019
	£'000	£'000	£'000
 Unclaimed dividends refunded to the Company	-	-	(12)
2019 fourth interim dividend of 3.13p (2018: 3.04p)	4,154	3,922	3,922
2020 first interim dividend of 3.26p (2019: 3.13p)	4,356	4,038	4,038
2019 second interim dividend of 3.13p	-	-	4,081
2019 third interim dividend of 3.13p	-	-	4,100
Total dividends paid in the period/year	8,510	7,960	16,129

 A second interim dividend of 3.26p has been paid on 3rd January 2020 for the financial year ending 30th June 2020, costing £4,428,000.

A third interim dividend of 3.26p per share has been declared for payment on 3rd April 2020 for the financial year ending 30th June 2020.

5.  Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	 31st December 2019	 31st December 2018	 30th June 2019
 Net assets (£'000)	468,651	373,499	441,517
Number of shares in issue	137,276,285	130,761,285	132,821,285
Net asset value per share	341.4p	285.6p	332.4p

JPMORGAN FUNDS LIMITED

25^th February 2020

For further information, please contact:

Divya Amin

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

ENDS

A copy of the half year will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM  

The half year will also shortly be available on the Company's website at www.jpmglobalgrowthandincome.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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